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China Challenged to Keep Yuan Stable as Dollar Rises

A customer counted Chinese yuan bank notes at a market in Beijing. The Chinese currency has declined against the dollar since the end of April.
Photo:
Reuters

Having had it easy for a few months, the Chinese central bank is now coming under renewed pressure to steady the yuan and prevent money from leaving China’s shores. As WSJ’s Lingling Wei reports:

The culprit is the dollar.

The greenback’s weakness in the past two months had given the People’s Bank of China some breathing room to stabilize the yuan, reducing the Chinese appetite for foreign assets along the way.

But since the end of April, the yuan has depreciated 0.6% against the dollar, eroding the 1% gain the Chinese currency made over the previous two months.

The yuan’s renewed weakness puts the PBOC back in a familiar juggling act: Its mandate to support growth requires it to pump credit into the economy, which tends to weaken the yuan. But it must make sure it doesn’t weaken the currency so much that it worsens the flood of money exiting China.